India seeks to amend trade treaties
The Economic Times (India)
India seeks to amend trade treaties
Partha Ghosh & Shubham Mukherjee
TIMES NEWS NETWORK
30 March 2004
NEW DELHI : India is seeking to amend bilateral trade treaties with foreign countries by diluting international protection agreements - a move which will provide the government respite against any international arbitration, a la Dabhol or Maruti.
A senior government official told ET today that New Delhi has been able to convince Singapore to dilute the provisions of international arbitration, and nationalisation or expropriation rules, in the proposed free trade agreement (FTA) between them.
As per the agreement, a foreign investor will not approach the international courts for arbitration if a legal case is pending within the country. Under the current bilateral investor protection agreements, the foreign investors will have direct access to the international court of arbitration in case of a legal dispute with the government. " New Delhi does not want a repeat of the Dabhol or Maruti experiences," officials said. Various other components of the agreement are currently being thrashed out, sources added.
With emerging trends in the negotiations between India and Singapore on the proposed FTA, christened the Comprehensive Economic Cooperation Agreement (CECA), the department of economic affairs (DEA) may open all bilateral international protection agreements (BIPAs) now in force so that they can be adequately amended and brought in line with the proposed FTA with the Island nation.
Senior lawyer Kapil Sibal, who has appeared in major corporate disputes in the past, however, said that arbitration matters are normally governed by the arbitration agreements entered into between the parties at the time of setting up of the company.
The government has so far signed BIPAs with 57 countries, out of which 45 have already come into force. Agreements are being finalised with several other countries. The BIPA discusses provisions of national treatment for foreign investment, MFN treatment to foreign investors, free repatriation or transfer of returns on investment, recourse to domestic disputes resolution and international arbitration for investor-state and state-state disputes, nationalisation or expropriation only in public interest on a non-discriminatory basis and against compensation, among others.
Additionally, foreign companies cannot seek compensation for damages to business citing actions, or inactions, of the government which may have impacted a particular business. As per existing trade agreements, a foreign car-maker can today seek damages for loss of business if the government decides to impose, say Euro 3 norms of emission by 2005, citing that this law was not in place when the company originally set up business in the country. There are several such steps which the government may take in the future keeping the interest of the public in mind, and these rules, therefore, come under nationalisation or expropriation, the source said.
